Our new Global Coincident Indicator (MSGCI) points to faster GDP growth of 3.0% in 3Q16 vs. our mid-July forecast of 2.4%. Upside surprises came from better-than-expected DM dynamics, which could give DM a better ramp into 2017 and seems to have made central banks become less dovish.
Nothing but upside surprises to DM growth it seems: Since we published our Summer Outlook, DM activity indicators have been holdingup much better than expected. Two months into 3Q16, it seems that our worries about the UK and the euro area were overblown and our projection of a rebound in the US was too cautious. Against this backdrop, many DM central banks seem to have become less dovish ahead of what will be a busy meeting schedule for DM central banks in the month of September. If sustained in the autumn,a stronger 3Q16 outturn could give DM a better entry level into 2017, creatingupside risks to our G10 forecasts of a slowdown from around 2.0%Y last year to 1.2%Y next year.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
